The opportunities provided by the Energy Efficiency and Conservation Block Grants (EECBG) and the Inflation Reduction Act (IRA) will soon be available to communities in Pennsylvania. These block grants can be used to kick start your municipality’s energy efficiency or renewable energy projects, and reach your sustainability goals. A community can reduce the use of fossil fuels through energy efficiency improvements in transportation, distribution of heating and cooling, and installing renewable energy technology, to name a few. Pennsylvania has 28 municipalities and 18 counties eligible to receive a direct block grant from the federal government, and all others will be eligible to apply for competitive grants and other programs through both the federal government and the Commonwealth.
Attend Pennsylvania’s Virtual Sustainability Summit next week (Oct 3-7) and/or PML’s Municipal Sustainability Conference (Nov 15 at Villanova) to learn more about the opportunities presented in this article.
The Block Grants will be available starting in the 4th quarter of this year and will award a minimum of $75,000 to municipalities who have a population greater than 35,000. Additional funding will be available for municipalities having populations of 50,000 or more based on the formula in the bill. Counties with a minimum population of 200,000 are also eligible to receive direct funding. Opportunities exist for municipalities not eligible for direct funding, including competitive grants from the federal government and funding received by the Commonwealth that must be passed on to local governments.
Inflation Reduction Act
The programs and discounts provided through the IRA offer communities a great opportunity to leverage the EECBG funds for greater benefit. Both programs provide financial opportunities that can be used together to help communities improve their energy infrastructure. The IRA provides municipalities and nonprofits with direct payments of up to 60% of the cost of work done to electrify fleets, install solar systems, and increase energy efficiency–and provides significant additional discounts and support for solar and energy efficiency improvements in low-income communities.
In order to make clean energy more affordable and accessible, IRA includes specific discounts and funding for building solar and wind energy in low-income communities and on affordable housing projects. Projects implemented in low-income neighborhoods on affordable housing, and/or in energy communities will earn the largest tax credits through IRA. Low-income neighborhoods are defined as having households at <200% of the poverty line or <80% of median income in the area. Eligible low-income housing is defined under the covered housing program in section “a” subsection 3. To benefit from the affordable housing discounts, the energy savings must be distributed equitably throughout the units. IRA will provide direct-pay clean energy tax credits to municipalities, nonprofits, and collaboratives, allowing municipalities to directly invest in energy improvements without the need for power purchase agreements or other complicated financial mechanisms.
Together EECBG and IRA will positively impact low-income communities by funding local governments and providing tax credits to stretch those investments much further. The inclusion of direct payments and higher tax credits for investing in low-income and energy communities provides more equitable funding distribution, allowing energy savings to be felt by residents who need it the most.
We encourage you to use the Sustainable Pennsylvania program, a joint project of Sustainable Pittsburgh and the Pennsylvania Municipal League, as a template for planning your municipality’s next steps toward equitable energy efficiency improvements. The program helps you create a framework to guide the reporting of energy use and carbon and greenhouse gas emissions. Sustainable Pennsylvania’s self directed program can provide guidance to help your community build or implement a climate action plan. This will help prepare your community to receive funds through EECBG and leverage the new benefits provided by the Inflation Reduction Act (IRA). If you have any questions or need additional information please contact Jim Price at jprice@sustainablepittsburgh.org.
Summary of Investment-Based Tax Credits included in IRA
- Commercial Investment Tax Credit for Solar and Energy Storage
- Timeframe: placed in service between December 31, 2021 and before December 31, 2024.
- Base credit: 6%
- Multiplier Credits: 5X multiplier for:
- facilities with max net output of less than 1MWAC
- facilities with max net output of greater than 1MWAC and meet prevailing wage and apprenticeship requirements
- Eligible investments include:
- energy storage and microgrid controllers
- qualified interconnection property (for facilities with net output not greater than 5MWAC)
- +10% for domestic content bonus
- +10% for Energy Community bonus
- +10% for solar located in low-income communities
- +20% for solar as part of a low-income residential building or economic benefit project
- Clean Electricity Investment Credit (CEIC)
- Timeframe: placed in service after December 31, 2024
- Base credit: 6%
- Multiplier Credits: 5X multiplier for:
- facilities with max net output of less than 1MWAC
- facilities with max net output of greater than 1MWAC and meet prevailing wage and apprenticeship requirements
- Eligible investments include:
- energy storage and microgrid controllers
- qualified interconnection property (for facilities with net output not greater than 5MWAC)
- +10% for domestic content bonus
- +10% for Energy Community bonus
- +10% for solar located in low-income communities
- +20% for solar as part of a low-income residential building or economic benefit project
Phase Down: Establishes a GHG emissions rate (Secretary’s Guidance coming no later than January 1, 2025) Credits phase down based on the year when US electric generation reduces emissions by 25% or 2032.